This fumble – at "just" $120mm losses per year – is still pretty small compared to its billions in income. A drop in the bucket!
But the reason they can take, and survive, any number of such unwise swings at no material risk to their insiders & shareholders is that their overall income is largely a function of their oligopolistic power & bottomless access to cheap federal money. They just have to avoid drawing on it "too much", in a "too unseemly" manner.
They can push that advantage a little more when they lose more elsewhere, as long as their coarse risk and overall results look similar to their peers – who are similarly pressing their special advantages around the edges.
So there won't be a specific measly transfer from public funds, "this is covering your failed Bilt program", of course. But they can just lean on their advantages a little more, and "keep up with the Joneses" in their peer banks in coarse indicators, with everyone at the trough (executives, politicians, politicians' pet projects, major shareholders) not facing any even marginal negative feedback.
And in some next major macro reversal which puts all banks of the same class in danger, it'll all be papered over again – bringing them up to some level of stability without regard to how many extra hundreds of millions leaked through Bilt-style errors or sweetheart deals to favored groups. So de facto, retrospectively, all those leaks were "free" to the insiders.
If you believe all that then it sounds like you should invest 100% of your assets in systemically important bank stocks. If they have literally zero risk due to unending bailouts then your risk-adjusted returns will be amazing.
Large amounts go to management insiders, or are kicked-back to politicians & their allies or pet causes via donations or sweetheart deals to favored projects – which might show up as "losses" on "failed projects" eventually, but hey, it can all be covered out of the privileged rolling take from everyone on the outside.
Haven't they only had one so far, that they repaid with interest?
However, were WF to make a series of bad business decisions and end up in dire straights, can we really confidently say they'll get bailed out yet again? I want to think that a single bank screwing themselves up would face a markedly different response than the global economy melting down.
To add detail: SVB was a subsidiary of SVB Financial Group, a holding company that owned the bank as well as some other things. SVB still exists, but is no longer a subsidiary of that holding company. It was completely taken over by the FDIC so they could make depositors whole. The former owners lost their biggest business, had to liquidate the rest of their businesses, and filed for bankruptcy a week later. They did not get bailed out.
The thing is, they were not exactly behaving badly. Their big mistake was over-investing in "safe" long-term government bonds. These assets are traditionally considered very low-risk, but rapidly rising interest rates made them lose book value, and some stakeholders got a bit jittery. Then SVB's leadership held a disastrous conference call where they basically said "everything will be fine, as long as there is no bank run", which pretty much instantly kicked off a bank run on ~80% of all their deposits. Even the best-managed banks could not withstand that kind of bank run. SVB basically got unlucky. They were not horribly mismanaged like everybody seems to assume.
I think that’s a good thing. I’m unconvinced the same wouldn’t happen at WF.
[edit] You edited your comment with a significantly larger amount of preamble, so I’m adding: I agree, and I am very well read on SVB. They were simply unlucky, and perhaps made a bad choice in overinvesting in illiquid bonds, plus bad VC behavior leading to the bank run. None of that was my point.
In the case of a big bank making a series of small bad bets it would not really affect others like in this case. Other banks don't care about this product failing. What, IMO, is more likely that just their profitability will suffer till they start making better decisions again and if WF persists with the bad decisions the valuable parts will be acquired.